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Where Taxpayers and Advisers Meet

Classic Cars to spouse

MANHAR
Posts: 64
Joined: Wed Aug 06, 2008 4:01 pm

Classic Cars to spouse

Postby MANHAR » Fri Mar 15, 2019 5:15 pm

Hi ,

I would be grateful if someone could please confirm or advise on a clients position.

The husband is in poor health and has a collection of vintage cars built over many years primarily as a hobby / passion. They are worth approximately £350,000.
He would like advice on the best way forward as he does want to gift the funds to his family. He is concerned about the PET 7 year rule.

I think:

1) There should be no Capital Gains Tax as any sale would be exempt as a "classic car". However should he gift the cars or sell and distribute the funds to his children it would get caught for IHT (as he has other assets which would use up his allowance) if he did not survive 7 years.

2) A better solution may be to transfer the ownership/insurance etc of the vintage cars all to his wife who is in better health than him (although that is no guarantee of a longer life).

- there would be no Capital Gains Tax as it is an exempt asset and also transfers between spouses are tax free.

- his wife could then either sell the cars and gift the funds (or give the cars) to the children and hopefully have a much better chance of surviving the 7 years.

Thanks in advance for any advice you can offer.

Regards
Manhar

pawncob
Posts: 4248
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: Classic Cars to spouse

Postby pawncob » Fri Mar 15, 2019 6:43 pm

Cars are exempt from CGT, so any disposal is tax free (sale or gift)
To whom he gifts them is a personal matter with no tax implications if gifted to wife. Gift to children is decried by OP.
With a pinch of salt take what I say, but don't exceed your RDA

AGoodman
Posts: 711
Joined: Fri May 16, 2014 3:47 pm

Re: Classic Cars to spouse

Postby AGoodman » Fri Mar 15, 2019 7:44 pm

Depending on their age/health, either H or W could also consider term life insurance at 40% of the value to cover the risk on any gifts. It should be flat, rather than decreasing, because the gifts would absorb their nil rate bands and the decreasing rates for PETs etc are irrelevant.

MANHAR
Posts: 64
Joined: Wed Aug 06, 2008 4:01 pm

Re: Classic Cars to spouse

Postby MANHAR » Sat Mar 16, 2019 2:44 pm

Thank you very much to both Pawncob & AGoodman - your prompt postings are much appreciated.

I will also ask them to look into and consider the term insurance cover.

Kind Regards
Manhar

MANHAR
Posts: 64
Joined: Wed Aug 06, 2008 4:01 pm

Re: Classic Cars to spouse

Postby MANHAR » Sat Mar 16, 2019 3:05 pm

PS: Pawncob - sorry for appearing dim but in your final sentence what does "OP" refer to please ?

" Gift to children is decried by OP."


Thanks

maths
Posts: 7477
Joined: Wed Aug 06, 2008 3:25 pm

Re: Classic Cars to spouse

Postby maths » Sat Mar 16, 2019 8:44 pm

It is perhaps worth appreciating that any IHT charge arising due to the death of the donor within 7 years of making a lifetime gift is a liability of the donee (not donor).

Term assurance as mentioned by AG could cover this potential charge; however, as the quantum of this charge varies depending upon how long the donor survives (ie the charge become less over the 7 year period) a 7 year decreasing term assurance would be most suitable to enable the donee to meet any such charge.

However, the effect of lifetime gifting (and donor death within 7 years) increases any IHT charge on the estate of the donor on the donor's death by 40% of the nil rate band (ie 40% of £325K ie 130k). It may then make sense for a level 7 year term assurance also being taken out to cover this 130k charge).

If statistically W's death is likely to occur post that of H then transfers to W to then effect the family gifts may make sense.

pawncob
Posts: 4248
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Re: Classic Cars to spouse

Postby pawncob » Sat Mar 16, 2019 11:20 pm

OP would be you, the Original Poster.
With a pinch of salt take what I say, but don't exceed your RDA

MANHAR
Posts: 64
Joined: Wed Aug 06, 2008 4:01 pm

Re: Classic Cars to spouse

Postby MANHAR » Sun Mar 17, 2019 3:35 pm

Thank you maths for your valuable contibution.

And thank you Pawncob for clarifying what "OP" was. Being late on Friday I was racking my brain as to what piece of tax legislation you may be referring to :D

Best regards
Manhar


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